8 unchanged sentences
Global economic and political conditions, including trade tariffs, import-export restrictions, and other restrictions, may have a negative impact on our business and financial results.
+Added: China's requirement of export permits for InP is an example.
We are subject to a number of unique legal and operational risks associated with our corporate structure.
2 unchanged sentences
Our NASDAQ stock price is volatile and our stock price could decline.
−Removed: Unpredictable fluctuations in our operating results, changes and events in our end markets and global trends cause volatility in our stock price.
+Added: Unpredictable fluctuations in our operating results, export permit requirements, changes and events in our end markets and global trends cause volatility in our stock price.
We face litigation and legal proceedings which could adversely affect our business, financial condition, results of operations or cash flows.
2 unchanged sentences
Shutdowns or underutilizing our manufacturing facilities may result in declines in our gross margins.
−Removed: ● Escalating trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.
+Added: Escalating and volatile trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.
If China places restrictions on freight and transportation routes and on ports of entry and departure this could result in shipping delays or increased costs for shipping.
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We may not achieve these specifications.
−Removed: ● We are subject to foreign exchange gains and losses that materially impact our consolidated s tatements of operations.
+Added: We are subject to foreign exchange gains and losses that materially impact our consolidated statements of operations.
Because we are a global company we are exposed to changes and swings in foreign exchange, particularly when currencies experience periods of volatility.
3 unchanged sentences
Global economic and political conditions, including trade tariffs, import-export restrictions, and other restrictions, may have a negative impact on our business and financial results.
+Added: China's requirement of export permits for InP is an example.
In September 2018, the United States announced a list of thousands of categories of goods that became subject to Section 301 tariffs when imported into the United States from China.
4 unchanged sentences
This required Tongmei to seek permits from the applicable Chinese authorities to export gallium arsenide and germanium substrates.
−Removed: Since that time, a general escalation has been underway with further increases to the tariffs from the US and additional export controls from China.
+Added: Since that time, a general escalation has been underway with further increases to the tariffs from the US and additional export controls from China, including for InP wafers.
The escalating requirements resulted in a new layer of administration within our company.
8 unchanged sentences
On February 1, 2025, the United States again further increased the tariff on imports of many products from China, including our wafer substrates, to 60%.
+Added: On February 4, 2025, China began to require export permits on InP wafers.
+Added: This requirement remains major concern for AXT.
On March 4, 2025, the United States further increased the tariff on imports of many products, including our wafer substrates, to 70%.
+Added: On December 27, 2025, the Standing Committee of the National People’s Congress of China (“NPC”) passed amendments to the Foreign Trade Law of the People’s Republic of China, which expands the scope of trade policy controls and response mechanisms and enhancing the Chinese government’s authority and policy tools in managing foreign trade.
+Added: On February 20, 2026, the U.S.
+Added: Supreme Court invalidated many of the global tariffs previously imposed under the International Emergency Economic Powers Act of 1977 (the "IEEPA") and the U.S.
+Added: Customs and Border Protection subsequently announced that IEEPA-based tariff provisions would be terminated effective February 24, 2026.
+Added: However, tariffs imposed under other authorities, including Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, remain in effect, and the U.S.
+Added: government has indicted that it may pursue additional or replacement tariffs under alternative legal authorities, including temporary measures under Section 122 of the Trade Act of 1974.
+Added: If maintained, these announced new tariffs, as well as related measures that could be taken by other countries and the potential escalation of trade disputes, could affect our business and results of operations.
+Added: Indium phosphide substrates are the primary revenue generator derived from imports into the U.S.
+Added: This revenue has been impacted by additional tariffs imposed by the United States and by export controls implemented by China.
+Added: In 2024, 8% of our total worldwide revenue was from sales in North America, primarily in the U.S.;
+Added: however, in 2025, only approximately 2% of our revenue was generated by sales to customers in North America.
All of our wafer substrates are manufactured in China and in the years 2025, 2024 and 2023, approximately 2%, 8% and 10% of our revenue, respectively, were generated by sales to customers in North America, primarily in the U.S.
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For example, in the third quarter of 2022 our gross margin was 42.0% but it dropped to 10.7% in the third quarter of 2023 as a result of several of these factors.
+Added: In the first quarter of 2025, our gross margin was a negative 6.4% but improved to 8.0% in the second quarter of 2025;
+Added: in the third quarter of 2025, our gross margin has further improved to 22.3%.
+Added: However, there can be no assurance that our gross margin will not fluctuate in future periods due to ongoing uncertainty of various factors.
Our raw material companies experience selling price volatility and purchase price volatility in acquiring base materials.
−Removed: We consolidate the results of several of these raw material companies, and any reduction in their gross margins could have a significant, adverse impact on our overall gross margins.
+Added: We consolidate the results of two of these raw material companies, and any reduction in their gross margins could have a significant, adverse impact on our overall gross margins.
One or more of our companies has in the past sold, and may in the future sell, raw materials at significantly reduced prices in order to gain volume sales or sales to new customers.
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In addition, lead times required by our customers are shrinking, which reduces our ability to forecast orders and properly balance our capacity utilization.
−Removed: Cyber-attacks, system security risks and data protection issues could disrupt our internal operations and cause a reduction in revenue, increase in expenses, negatively impact our results of operation or result in other adverse consequences.
+Added: Cyber-attacks, system security risks and data protection issues could disrupt our internal operations and cause a reduction in revenue, increase in expenses, negatively impact our results of operations or result in other adverse consequences.
Like most technology companies, we could be targeted in cyber-attacks.
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Cyber-attacks could use fraud, trickery or other forms of deception.
+Added: In addition, the rapid evolution of AI has the potential to disrupt existing business models and markets and could result in a material adverse effect on our business.
+Added: The increased adoption of AI technologies may also increase our cybersecurity risks.
A cyber-attack could expose us to a risk of loss or misuse of information, result in litigation and potential liability, damage our reputation or otherwise harm our business.
4 unchanged sentences
Delayed sales, lower margins or lost customers could adversely affect our financial results and reputation.
−Removed: COVID-19 or other contagious diseases may affect our business operations and financial performance.
−Removed: The spread of COVID-19 impacted our operations and financial performance.
−Removed: The outbreak of COVID triggered references to the SARS outbreak, which occurred in 2003 and affected our business operations.
−Removed: Any severe occurrence of an outbreak of a contagious disease such as COVID-19, SARS, Avian Flu or Ebola may cause us or the government to temporarily close our manufacturing operations in China.
−Removed: In January 2020, virtually all companies in China were ordered to remain closed after the traditional Lunar New Year holiday ended, including our subsidiaries in China.
−Removed: If there is a renewed surge of the COVID-19 pandemic in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.
+Added: We may become subject to risks associated with artificial intelligence and machine learning technologies.
+Added: Artificial intelligence, including machine learning technology (collectively, “AI”), is complex and rapidly evolving.
+Added: While the full extent of current or future risks related thereto is not possible to predict, AI could significantly disrupt the business models and markets in which we operate and subject us to increased competition, legal and regulatory risks and compliance costs, any of which could have a material adverse effect on our business, financial condition and results of operations.
+Added: Although we do not currently utilize AI to a significant extent in our operations, any future potential integration of AI technologies into our operations, any new regulations related to AI may also impose on us certain obligations and costs related to monitoring and compliance, and we could be subject to regulatory actions if we or they are deemed not to have complied.
+Added: We face risks related to health epidemics and other outbreaks, which could significantly disrupt our business operations.
+Added: The spread of a novel strain of coronavirus (COVID-19) around the world in the first quarter of 2020, which was declared a pandemic by the World Health Organization in March 2020, significantly impacted our operations and financial performance.
+Added: In early 2020, in response to intensifying efforts to contain the spread of COVID-19, the Chinese government took a number of actions, which included, among others, ordering companies to remain closed after the traditional Lunar New Year holiday ended, which included our subsidiaries in China, and restricting travel between China and the U.S..
+Added: In December 2022, the PRC government ended its zero-COVID policy.
+Added: If there is a future outbreak in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.
If one or more of our key suppliers is required to close for an extended period, we might not have enough raw material inventories to continue manufacturing operations.
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Regular use in the normal course of business of hazardous chemicals or hazardous materials or a company’s failure to meet the ever-tightening standards for control of hazardous chemicals or hazardous materials could result in orders to shut down permanently, fines or other severe measures.
−Removed: Any such orders directed at one of our raw material companies could result in impairment charges if the
−Removed: company is forced to close its business, cease operations or incurs fines or operating losses, which would have a material adverse effect on our financial results.
+Added: Any such orders directed at one of our raw material companies could result in impairment charges if the company is forced to close its business, cease operations or incurs fines or operating losses, which would have a material adverse effect on our financial results.
Further, some of our raw material companies share facilities with our raw material investment partners.
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in addition, if we are deemed to be the most financially viable of the partners, plaintiffs may decide to pursue us for damages.
+Added: Our financial performance can be adversely affected if there are unfavorable financial results in any of our raw material companies.
+Added: The raw material companies in our vertically integrated supply chain have historically made a positive contribution to our financial performance.
+Added: However, if there are unfavorable changes in revenue, average selling prices, gross margins or operating expenses in one or more of the consolidated companies, then this can result in a negative impact on our consolidated revenue, gross margin and profitability.
+Added: For unconsolidated, minority-owned joint ventures, these changes can result in a reduction in Equity in Income of Unconsolidated Joint Venture.
+Added: In 2025 and 2024, these unconsolidated joint ventures contributed gains of $0.8 million and $3.4 million, respectively, to our consolidated financial statements.
+Added: The last time the companies accounted for under the equity method of accounting contributed a loss was 2019 with a loss of $1.9 million.
Unforeseen manufacturing issues and restrictions at the new manufacturing sites could occur.
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As a result of the newly published list, we were required to seek additional permits.
+Added: If we do not successfully develop new product features and improvements and new products that respond to customer requirements, our ability to generate revenue, obtain new customers, and retain existing customers may suffer.
+Added: Our success depends on our ability to offer new product features, improved performance characteristics and new products, such as larger diameter substrates, low defect density substrates, thicker or thinner substrates, substrates with extreme surface flatness specifications, substrates that are manufactured with a doped crystal growth process or substrates that incorporate leading technology and other technological advances.
+Added: This is an ongoing iterative research and development process performed by our China team in collaboration with our product marketing managers.
+Added: New products must meet customer needs and compete effectively on quality, price and performance.
+Added: The markets for our products are characterized by rapid technological change, changing customer needs and evolving industry standards.
+Added: If our competitors introduce products employing new technologies or performance characteristics, our existing products could become obsolete and unmarketable.
+Added: Over time, we have seen our competitors selling more substrates manufactured using a crystal growth technology similar to ours, which has eroded our technological differentiation.
+Added: The development of new product features, improved performance characteristics and new products can be a highly complex process, and we may experience delays in developing and introducing them.
+Added: Any significant delay could cause us to fail to timely introduce and gain market acceptance of new products.
+Added: Further, the costs involved in researching, developing and engineering new products could be greater than anticipated.
+Added: If we fail to offer new products or product enhancements or fail to achieve higher quality products, we may not generate sufficient revenue to offset our development costs and other expenses or meet our customers’ requirements.
+Added: The loss of one or more of our tier one substrate customers would significantly hurt our operating results.
+Added: From time to time, sales to one or more of our tier one customers individually represent more than 10% of our revenue and if we were to lose a major customer the loss would negatively impact our revenue.
+Added: Our customers are not obligated to purchase a specified quantity of our products or to provide us with binding forecasts of product purchases.
+Added: In addition, our customers may reduce, delay or cancel orders.
+Added: In the past, we have experienced a slowdown in bookings, significant push-outs and cancellation of orders from customers.
+Added: If we lose a major customer or if a customer cancels, reduces or delays orders, our revenue would decline.
+Added: In addition, customers that have accounted for significant revenue in the past may not continue to generate revenue for us in any future period.
+Added: Any loss of customers or any delay in scheduled shipments of our products could cause revenue to fall below our expectations and the expectations of market analysts or investors, causing our stock price to decline.
+Added: Defects in our products could diminish demand for our products.
+Added: Our wafer products are complex and may contain defects, including defects resulting from impurities inherent in our raw materials or inconsistencies in our manufacturing processes.
+Added: We have experienced quality control problems with some of our products, which caused customers to return products to us, reduce orders for our products, or both.
+Added: If we experience quality control problems, or experience other manufacturing problems, customers may return product for credit, cancel or reduce orders or purchase products from our competitors.
+Added: We may be unable to maintain or increase sales to our customers and sales of our products could decline.
+Added: Defects in our products could cause us to incur higher manufacturing costs and suffer product returns and additional service expenses, all of which could adversely impact our operating results.
+Added: If new products developed by us contain defects when released, our customers may be dissatisfied and we may suffer negative publicity or customer claims against us, lose sales or experience delays in market acceptance of our new products.
Demand for our products may decrease if demand for the end-user applications decrease or if manufacturers downstream in our supply chain experience difficulty manufacturing, marketing or selling their products.
Our products are used to produce components for electronic and opto-electronic products.
−Removed: Accordingly, demand for our products is subject to the demand for end-user applications, including certain consumer applications, which
−Removed: utilize our products.
−Removed: For example, we developed an 8-inch gallium arsenide wafer targeting an application in a consumer product.
−Removed: Our customer subsequently informed us that its end-user customer has cancelled its project.
−Removed: Volume production of the intended product was scheduled to begin in 2025.
−Removed: While there may be other end users, this particular cancellation was the loss of a potentially high-volume sales opportunity.
+Added: Accordingly, demand for our products is subject to the demand for end-user applications, including certain consumer applications, which utilize our products.
+Added: For example, we have developed an 8-inch gallium arsenide wafer targeting an application in a consumer product, which was scheduled to begin production in 2024.
+Added: However, we were informed by our customer that its end-user customer cancelled its project.
+Added: While there may be other end users, this particular cancellation is the loss of a potentially high-volume sales opportunity.
Other factors affecting the ability of the manufacturers downstream in our supply chain to introduce and market their products successfully, include:
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In the second half of 2022, many companies purchased more inventory than needed, in part due to fears of shortages resulting from COVID.
−Removed: This triggered an inventory correction cycle and our revenue declined as customers worked down their inventory level, We expect similar cycles of strong demand followed by lower demand will occur for various InP, GaAs or Ge substrates in the future.
−Removed: Our financial performance can be adversely affected if there are unfavorable financial results in any of our raw material companies.
−Removed: The raw material companies in our vertically integrated supply chain have historically made a positive contribution to our financial performance.
−Removed: However, if there are unfavorable changes in revenue, average selling prices, gross margins or operating expenses in one or more of the consolidated companies, then this can result in a negative impact on our consolidated revenue, gross margin and profitability.
−Removed: If the companies are accounted for under the equity method, then these changes can result in a reduction in Equity in Income of Unconsolidated Joint Venture Companies.
−Removed: In 2024 and 2023, the companies accounted for under the equity method of accounting contributed a gain of $3.4 million and $1.9 million, respectively, to our consolidated financial statements.
−Removed: The 2023 total includes impairment charges of $1.9 million.
−Removed: The last time the companies accounted for under the equity method of accounting contributed a loss was 2019 with a loss of $1.9 million.
+Added: This triggered an inventory correction cycle and our revenue declined as customers worked down their inventory level.
+Added: We expect similar cycles of strong demand followed by lower demand will occur for various InP, GaAs or Ge substrates in the future.
Intense competition in the markets for our products could prevent us from increasing revenue and achieving profitability.
1 unchanged sentence
We face competition for our wafer substrate products from other manufacturers of substrates, such as Sumitomo, JX, Freiberger, Umicore, Vital and CCTC, and from companies, such as Qorvo and Skyworks, that are actively considering alternative materials to GaAs and marketing semiconductor devices using these alternative materials.
−Removed: If we are unable to compete effectively, our revenue may
−Removed: decrease and we may not maintain profitability.
+Added: If we are unable to compete effectively, our revenue may decrease and we may not maintain profitability.
We face many competitors that have a number of significant advantages over us, including:
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There is no assurance that any changes effected by us will result in sufficient cost reductions to allow us to reduce the price of our products to remain competitive or improve our gross margins.
−Removed: The loss of one or more of our tier one substrate customers would significantly hurt our operating results.
−Removed: From time to time, sales to one or more of our tier one customers individually represent more than 10% of our revenue and if we were to lose a major customer the loss would negatively impact our revenue.
−Removed: Our customers are not obligated to purchase a specified quantity of our products or to provide us with binding forecasts of product purchases.
−Removed: In addition, our customers may reduce, delay or cancel orders.
−Removed: In the past, we have experienced a slowdown in bookings, significant push-outs and cancellation of orders from customers.
−Removed: If we lose a major customer or if a customer cancels, reduces or delays orders, our revenue would decline.
−Removed: In addition, customers that have accounted for significant revenue in the past may not continue to generate revenue for us in any future period.
−Removed: For example, in 2021 and 2022, our InP wafers were used in a high-volume consumer product.
−Removed: Subsequently, a newer version did not use InP and our revenue declined.
−Removed: Any loss of customers or any delay in scheduled shipments of our products could cause revenue to fall below our expectations and the expectations of market analysts or investors, causing our stock price to decline.
We have made and may continue to make strategic investments in raw materials suppliers, which may not be successful and may result in the loss of all or part of our investment.
4 unchanged sentences
In the first quarter of 2019, we incurred an impairment charge of $1.1 million for a germanium materials company in China in which we had a 25% ownership interest, writing down our investment to zero value.
−Removed: During the second quarter of 2023, one of our equity investments assessed one of its equity investments was fully impaired, leading to a $754,000 impairment charge in our financial results for the second quarter of 2023.
+Added: During the second quarter of 2023, one of our equity investments determined that one of its equity investments was fully impaired, leading to a $754,000 impairment charge in our financial results for the second quarter of 2023.
In the fourth quarter of 2023, we divested another equity investment, incurring a net impairment charge of $1.1 million.
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If we are unable to recover from a fire or natural disaster, our business and operating results could be materially and adversely affected.
−Removed: Defects in our products could diminish demand for our products.
−Removed: Our wafer products are complex and may contain defects, including defects resulting from impurities inherent in our raw materials or inconsistencies in our manufacturing processes.
−Removed: We have experienced quality control problems with some of our products, which caused customers to return products to us, reduce orders for our products, or both.
−Removed: we experience quality control problems, or experience other manufacturing problems, customers may return product for credit, cancel or reduce orders or purchase products from our competitors.
−Removed: We may be unable to maintain or increase sales to our customers and sales of our products could decline.
−Removed: Defects in our products could cause us to incur higher manufacturing costs and suffer product returns and additional service expenses, all of which could adversely impact our operating results.
−Removed: If new products developed by us contain defects when released, our customers may be dissatisfied and we may suffer negative publicity or customer claims against us, lose sales or experience delays in market acceptance of our new products.
Our substrate products have a long qualification cycle that makes it difficult to forecast revenue from new customers or for new products sold to existing customers.
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During periods of weak demand, customers typically reduce purchases, delay delivery of products and/or cancel orders for our products.
−Removed: Order cancellations, reductions in order size or delays in
−Removed: orders could occur and would materially adversely affect our business and results of operations.
+Added: Order cancellations, reductions in order size or delays in orders could occur and would materially adversely affect our business and results of operations.
Actions to reduce our costs may be insufficient to align our structure with prevailing business conditions.
3 unchanged sentences
If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses or fixed manufacturing costs for that quarter, which would harm our operating results.
−Removed: If we do not successfully develop new product features and improvements and new products that respond to customer requirements, our ability to generate revenue, obtain new customers, and retain existing customers may suffer.
−Removed: Our success depends on our ability to offer new product features, improved performance characteristics and new products, such as larger diameter substrates, low defect density substrates, thicker or thinner substrates, substrates with extreme surface flatness specifications, substrates that are manufactured with a doped crystal growth process or substrates that incorporate leading technology and other technological advances.
−Removed: This is an ongoing iterative research and development process performed by our China team in collaboration with our manufacturing managers.
−Removed: New products must meet customer needs and compete effectively on quality, price and performance.
−Removed: The markets for our products are characterized by rapid technological change, changing customer needs and evolving industry standards.
−Removed: If our competitors introduce products employing new technologies or performance characteristics, our existing products could become obsolete and unmarketable.
−Removed: Over time, we have seen our competitors selling more substrates manufactured using a crystal growth technology similar to ours, which has eroded our technological differentiation.
−Removed: The development of new product features, improved performance characteristics and new products can be a highly complex process, and we may experience delays in developing and introducing them.
−Removed: Any significant delay could cause us to fail to timely introduce and gain market acceptance of new products.
−Removed: Further, the costs involved in researching, developing and engineering new products could be greater than anticipated.
−Removed: If we fail to offer new products or product enhancements or fail to achieve higher quality products, we may not generate sufficient revenue to offset our development costs and other expenses or meet our customers’ requirements.
We purchase critical raw materials and parts for our equipment from single or limited sources, and could lose sales if these sources fail to fill our needs.
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Risks Related to International Aspects of Our Business
−Removed: Escalating trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.
+Added: Escalating and volatile trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.
+Added: On February 4, 2025, China added indium phosphide substrates to its export control list.
+Added: As a result, the three wafer substrate product families manufactured by Tongmei all require permits from China’s Ministry of Commerce before they can be exported from China.
+Added: InP export permits represent the most significant challenge we currently face.
+Added: The portal to apply for exports of indium phosphide from China opened in March and we immediately began to submit our applications.
+Added: On June 11, Tongmei was informed that it had satisfied the applicable requirements for a permit to export indium phosphide and received its initial export permits from the Ministry of Commerce of the People’s Republic of China to resume shipping indium phosphide substrates to certain customers in Europe and Japan.
+Added: While we have received some permits as of the date of this report, we cannot predict when a permit application will be reviewed and approved.
+Added: On December 27, 2025, the Standing Committee of the National People’s Congress of China (“NPC”) passed amendments to the Foreign Trade Law of the People’s Republic of China, which expands the scope of trade policy controls and response mechanisms and enhancing the Chinese government’s authority and policy tools in managing foreign trade.
+Added: The fluidity of the export permit requirements and ongoing lack of surety for us and for our customers.
+Added: To our knowledge, indium phosphide is rarely used in military applications and we can reasonably expect that export permits to ship our indium phosphide substrates to the U.S.
+Added: will be granted.
+Added: But the timing for receiving permits remains uncertain, unclear and beyond our control.
+Added: We are actively monitoring and following up on the status of our applications.
In September 2018, the United States announced a list of thousands of categories of goods that became subject to Section 301 tariffs when imported into the United States from China.
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On March 4, 2025, the United States further increased the tariff on imports of many products, including our wafer substrates, to 70%.
−Removed: We have little or no germanium exports to the U.S.
+Added: On February 20, 2026, the U.S.
+Added: Supreme Court invalidated many of the global tariffs previously imposed under the International Emergency Economic Powers Act of 1977 (the "IEEPA") and the U.S.
+Added: Customs and Border Protection subsequently announced that IEEPA-based tariff provisions would be terminated effective February 24, 2026.
+Added: However, tariffs imposed under other authorities, including Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, remain in effect, and the U.S.
+Added: government has indicted that it may pursue additional or replacement tariffs under alternative legal authorities, including temporary measures under Section 122 of the Trade Act of 1974.
+Added: If maintained, these announced new tariffs, as well as related measures that could be taken by other countries and the potential escalation of trade disputes, could affect our business and results of operations.
+Added: Indium phosphide substrates are the primary revenue generator derived from imports into the U.S.
+Added: This revenue has been impacted by additional tariffs imposed by the United States and by export controls implemented by China.
+Added: In 2024, 8% of our total worldwide revenue was from sales in North America, primarily in the U.S.;
+Added: however, in 2025, only approximately 2% of our revenue was generated by sales to customers in North America.
+Added: We have little or no germanium imports into the U.S.
and historically a relatively small value of imports of gallium arsenide wafers into the U.S.
−Removed: Our primary revenue generator derived from imports into the U.S.
−Removed: is indium phosphide substrates.
While Tongmei has generally received the required permits for exports to countries in Asia and Europe, our U.S.
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have yet been approved.
−Removed: On February 4, 2025, China added indium phosphide substrates to its export control list.
−Removed: As a result, the three wafer substrate product lines manufactured by Tongmei all require permits from China’s Ministry of Commerce before they can be exported from China.
−Removed: To our knowledge, indium phosphide is rarely used in military applications and we can reasonably expect that export permits to ship our indium phosphide substrates to the U.S.
−Removed: will be granted.
−Removed: But since the requirement is new it will take at least several months from February 4, 2025 to have early applications processed .
All of our wafer substrates are manufactured in China and in the years 2025, 2024 and 2023, approximately 2%, 8% and 10% of our revenue, respectively, were generated by sales to customers in North America, primarily in the U.S.
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Further, the continued threats of tariffs and other trade restrictions could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales.
+Added: We continue to monitor developments closely, including pending legal challenges to certain tariff authorities, updated guidance from regulators, retaliatory measures, resolution of trade agreements and ongoing negotiations with additional trade partners.
+Added: In addition, ongoing uncertainty regarding the mechanisms, timing and amount of any refunds or other relief relating to previously paid duties may affect our cash flows and results in future periods.
+Added: We cannot predict the scope, timing or ultimate impact of these developments on our business.
The trade and political tensions between China and the U.S.
remain high and controls on exports and tariffs are changing and fluid.
−Removed: There can be no assurances that Tongmei will receive China permits to export our wafer substrates
−Removed: or that China will not adopt additional export control regulations that affect our business, financial condition and results of operations.
+Added: There can be no assurances that Tongmei will receive China permits to export our wafer substrates or that China will not adopt additional export control regulations that affect our business, financial condition and results of operations.
Reciprocally, there can be no assurance that the U.S.
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We believe that we do not require any permissions or approvals from the CSRC or other PRC central government authorities to complete a public offering of securities in the U.S.
−Removed: because we are a Delaware corporation
−Removed: with our principal corporate office in Fremont, California and the PRC laws and regulations that govern the listing of securities on a U.S.
+Added: because we are a Delaware corporation with our principal corporate office in Fremont, California and the PRC laws and regulations that govern the listing of securities on a U.S.
securities exchange apply to PRC companies.
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Such disruptions have had an adverse impact on our financial performance and could continue in the future.
−Removed: COVID-19 or other contagious diseases may affect our business operations and financial performance.
−Removed: The spread of COVID-19 impacted our operations and financial performance.
+Added: E pidemic diseases, such as COVID-19, other contagious diseases or the perception of their effects, may affect our business operations and financial performance.
+Added: Outbreaks of epidemic, pandemic, or contagious diseases, such as the recent COVID-19 pandemic could result in business disruptions and impact our operations and financial performance.
The outbreak of COVID triggered references to the SARS outbreak, which occurred in 2003 and affected our business operations.
2 unchanged sentences
If there is a renewed surge of the COVID-19 pandemic or of other contagious diseases in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.
−Removed: If one or more of our key suppliers is required to close for an extended period, we might not have enough raw material
−Removed: inventories to continue manufacturing operations.
+Added: If one or more of our key suppliers is required to close for an extended period, we might not have enough raw material inventories to continue manufacturing operations.
In addition, during COVID-19, travel restrictions between China and the U.S.
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If one of our key customers is required to close for an extended period, this may delay the placement of new orders.
+Added: Any significant outbreak of epidemic, pandemic, or contagious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, which could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
As a result, our revenue would decline.
2 unchanged sentences
Uncertain global economic and political conditions or low or negative growth in China, Europe or the United States, along with volatility in the financial markets and U.S.
−Removed: financial system, increasing national debt and fiscal concerns in various regions and the adoption and availability of fiscal and monetary stimulus measures to counteract the impact of the COVID-19 pandemic, pose challenges to our industry.
+Added: financial system, increasing national debt and fiscal concerns in various regions and the adoption and availability of fiscal and monetary stimulus measures, pose challenges to our industry.
Currently China’s economy is slowing and this could impact our financial performance.
10 unchanged sentences
delays in, or curtailment of, purchasing decisions by our customers or potential customers;
−Removed: ● increased credit risk associated with our customers or potential customers, particularly those that may operate in industries most affected by the economic downturn;
+Added: increased credit risk associated with our customers or potential customers, particularly those that may operate in industries most affected by an economic downturn;
impairment of our tangible or intangible assets.
10 unchanged sentences
The PRC central government may also exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our common stock.
−Removed: The PRC central government may also seek to significantly limit or completely hinder our ability to offer
−Removed: or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.
+Added: The PRC central government may also seek to significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.
Our international operations are exposed to potential adverse tax consequence in China.
11 unchanged sentences
Dividends paid to the Company are subject to a 10% PRC withholding tax.
−Removed: The Company is required to obtain approval from SAFE to transfer funds in or out of the PRC.
+Added: The Company is required to obtain approval from the State Administration of Foreign Exchange (“SAFE”) to transfer funds in or out of the PRC.
SAFE requires a valid agreement to approve the transfers, which are processed through a bank.
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Except for routine personal information necessary to process payroll and other benefits and emergency contact information, our PRC subsidiaries and PRC joint ventures do not collect or maintain personal information.
−Removed: All of our products are manufactured in the PRC by our PRC subsidiaries and PRC joint ventures.
−Removed: Although we are neither a PRC operating company nor do we conduct our operations in China through the use of VIEs, cybersecurity is increasingly a focus of the central government and the CAC could require AXT to comply with PRC cybersecurity regulations, which could cause us to make changes to our operations that could materially harm our business, financial condition and results of operations.
+Added: We believe our PRC subsidiaries and PRC joint ventures are in material compliance with the regulations or policies that have been issued by the CAC.
+Added: We do not believe AXT, Inc.
+Added: is subject to oversight by the CAC regarding data security.
+Added: is neither a PRC operating company nor do we conduct our operations in China through the use of VIEs.
+Added: However, cybersecurity is increasingly a focus of the central government and we may be required to change our existing practices in data privacy and cybersecurity matters at substantial costs, which could cause us to make changes to our operations that could materially harm our business, financial condition and results of operations.
We derive a significant portion of our revenue from international sales, and our ability to sustain and increase our international sales involves significant risks.
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All of our manufacturing facilities and most of our suppliers are also located outside the United States.
−Removed: Managing our overseas operations presents challenges, including periodic regional economic downturns, trade balance issues, threats of trade wars, varying business conditions and demands, political instability, variations in enforcement of intellectual property and contract rights in different jurisdictions, differences in the ability to develop relationships with suppliers and other local businesses, changes in U.S.
−Removed: and international laws and regulations, including import and export restrictions, fluctuations in interest and currency exchange rates, the ability to provide sufficient levels of technical support in different locations, cultural differences and perceptions of U.S.
+Added: Managing our overseas operations presents challenges, including export permit requirements, periodic regional economic downturns, trade balance issues, threats of trade wars, varying business conditions and demands, political instability, variations in enforcement of intellectual property and contract rights in different jurisdictions, differences in the ability to develop relationships with suppliers and other local businesses, changes in U.S.
+Added: and international laws and regulations, including import tariffs, fluctuations in interest and currency exchange rates, the ability to provide sufficient levels of technical support in different locations, cultural differences and perceptions of U.S.
companies, shipping delays and terrorist acts or acts of war, natural disasters and epidemics or pandemics, such as COVID-19, among other risks.
23 unchanged sentences
We are subject to foreign exchange gains and losses that may materially impact our consolidated statements of operations.
−Removed: For example, in 2024, 2023 and 2022, we incurred foreign exchange gains of $91,000, $169,000 and $1.6 million, respectively.
+Added: For example, in 2025, 2024 and 2023, we incurred foreign exchange losses of $74,000 and foreign exchange gains of $91,000 and $169,000, respectively.
The functional currency of our companies in China is the Chinese renminbi, the local currency.
30 unchanged sentences
We have in the past experienced quality problems with our products.
−Removed: Our previous quality problems caused us to lose market share to our competitors as some of our customers reduced their orders until our wafer surface quality was as good and as
−Removed: consistent as that offered by our competitors.
+Added: Our previous quality problems caused us to lose market share to our competitors as some of our customers reduced their orders until our wafer surface quality was as good and as consistent as that offered by our competitors.
If we are unable to continue to achieve customer qualifications for our products, or if we are unable to control product quality, customers may not increase purchases of our products, our China facilities will become underutilized, and we will be unable to achieve revenue growth.
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In addition, if power is shut off at any of our facilities at any time, either voluntarily or as a result of unplanned brownouts, during certain phases of our manufacturing process including our crystal growth phase, the work in process may be ruined and rendered unusable, causing us to incur costs that will not be covered by revenue, and negatively impacting our cost of revenue and gross margins.
−Removed: Although the audit report is prepared by an independent registered public accounting firm who is currently inspected fully by the PCAOB, there is no guarantee that future audit reports will be prepared by an independent registered public accounting firm that is completely inspected by the PCAOB.
+Added: Although our audit report is prepared by an independent registered public accounting firm who is currently inspected fully by the PCAOB, there is no guarantee that future audit reports will be prepared by an independent registered public accounting firm that is completely inspected by the PCAOB.
Our independent registered public accounting firm, BPM, is registered with the PCAOB and is subject to regular inspections by the PCAOB to assess its compliance with the applicable professional standards.
−Removed: Although we have operations in China, a jurisdiction where the PCAOB was, until recently, unable to conduct inspections without the approval of the Chinese government authorities, our independent registered public accounting firm is currently inspected fully by the PCAOB.
+Added: Although we have operations in China, a jurisdiction where the PCAOB was, until 2022, unable to conduct inspections without the approval of the Chinese government authorities, our independent registered public accounting firm is currently inspected fully by the PCAOB.
Inspections of other independent registered public accounting firms conducted by the PCAOB outside China have at times identified deficiencies in those independent registered public accounting firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.
3 unchanged sentences
capital markets.
−Removed: As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular PRC laws, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S.
−Removed: Congress which, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a non-U.S.
−Removed: independent registered public accounting firm completely.
−Removed: The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S.
−Removed: national securities exchanges such as the Nasdaq Global Select Market of issuers included on the SEC’s list for three consecutive years.
−Removed: It is unclear if this proposed legislation will be enacted.
−Removed: Furthermore, there have been recent deliberations within the U.S.
−Removed: government regarding potentially limiting or restricting companies based in China from accessing U.S.
−Removed: capital markets.
−Removed: On May 20, 2020, the U.S.
−Removed: Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed by independent registered public accounting firms that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S.
−Removed: authority in the independent registered public accounting firms’ local jurisdiction.
−Removed: House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020.
−Removed: Additionally, in July 2020, the U.S.
−Removed: President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the
−Removed: executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese companies listed on U.S.
−Removed: stock exchanges and their independent registered public accounting firms, in an effort to protect investors in the United States.
−Removed: In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S.
−Removed: investors) associated with investments in issuers based in China and summarizing enhanced disclosures the SEC recommends issuers based in China make regarding such risks.
−Removed: On March 18, 2021, the SEC adopted interim final rules to implement the HFCA Act, which requires the SEC to identify certain issuers that filed annual reports with audit reports issued by registered public accounting firms located in foreign jurisdictions and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in those jurisdictions (the “Commission-Identified Issuers”).
−Removed: Specifically, the SEC implemented the submission and disclosure requirements of the HFCA Act.
−Removed: On December 2, 2021, the SEC issued amendments to finalize the interim final rules.
−Removed: Further, the SEC established procedures to identify Commission-Identified Issuers and prohibit the trading of the securities of Commission-Identified Issuers as required by the HFCA Act.
−Removed: We will be required to comply with these rules if the SEC identifies us as a Commission-Identified Issuer.
−Removed: Under the HFCA Act, our securities may be prohibited from trading on the Nasdaq Global Select Market or other U.S.
−Removed: stock exchanges if we are determined to be a Commission-Identified Issuer for three consecutive years, and this ultimately could result in our common stock being delisted.
−Removed: Furthermore, on June 22, 2021, the U.S.
−Removed: Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S.
−Removed: stock exchanges if the issuer is determined to be a Commission-Identified Issuer for two consecutive years instead of three.
−Removed: On December 15, 2021, the Accelerating Holding Foreign Companies Accountable Act was introduced to the U.S.
−Removed: House of Representatives.
−Removed: On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely independent registered public accounting firms located in a non-U.S.
−Removed: jurisdiction because of a position taken by one or more authorities in that jurisdiction and was approved by the SEC on November 5, 2021.
−Removed: On December 16, 2021, the PCAOB issued a report on its determinations that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in the PRC and Hong Kong because of positions taken by PRC authorities in those jurisdictions.
−Removed: Beginning in March 2022, the SEC listed companies on either its conclusive list of issuers identified under the HFCA Act or its provisional list of issuers identified under the HFCA Act.
−Removed: Companies listed on the SEC’s conclusive list of issuers identified under the HFCA Act are determined to be Commission-Identified Issuers.
−Removed: The SEC did not list AXT, Inc.
−Removed: on either its conclusive list of issuers identified under the HFCA Act or its provisional list of issuers identified under the HFCA Act.
−Removed: On December 15, 2022, the PCAOB vacated its 2021 determinations that the positions taken by authorities in the PRC and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions.
−Removed: As a result, the SEC will not provisionally or conclusively identify an issuer as a Commission-Identified Issuer if it files an annual report with an audit report issued by a registered public accounting firm headquartered in either jurisdiction on or after December 15, 2022, until such time as the PCAOB issues a new determination.
−Removed: The SEC will continue to include any Commission-Identified Issuer on the provisional or conclusive list if they filed an annual report with an audit report issued by a registered public accounting firm headquartered in mainland China and Hong Kong prior to the PCAOB’s decision to vacate its 2021 determinations.
While an agreement has been reached among the CSRC, the SEC and the PCAOB regarding the inspection of PCAOB-independent registered public accounting firms in China, there can be no assurance that we will be able to comply with requirements imposed by U.S.
3 unchanged sentences
Risks Related to Our Financial Results and Capital Structure
−Removed: We may utilize our cash balances for relocating manufacturing lines, adding capacity, acquiring state-of-the-art equipment or offsetting a business downturn resulting in the decline of our existing cash and if we need additional capital, funds may not be available on acceptable terms, or at all.
−Removed: Our liquidity is affected by many factors, including among others, the relocation of our gallium arsenide manufacturing lines, the expansion of our capacity to meet market demand, the acquisition of state-of-the-art equipment, other capital expenditures, operating activities, the effect of exchange rate changes and other factors related to the uncertainties of the industry and global economies.
−Removed: Such matters could draw down our cash reserves, which could adversely affect our financial condition, require us to incur debt, reduce our value and possibly impinge our ability to raise debt and equity funding in the future, at a time when we might need to raise additional cash or elect to raise additional cash.
+Added: Management has broad discretion as to the use of our cash balances, including any proceeds from capital raises such as the offering completed in December 2025 for gross proceeds of approximately $100 million , and may not use such funds effectively.
+Added: If we need additional capital, funds may not be available on acceptable terms, or at all .
+Added: Our management has broad discretion in the application of our cash balances and if we are not able to use this cash effectively, it could adversely affect our business and operations.
+Added: Our liquidity is affected by many factors, including among others, the expansion of our capacity to meet market demand, in particular to add InP capacity, the acquisition of state-of-the-art equipment, relocating manufacturing lines, other capital expenditures, operating activities, offsetting a business downturn, the effect of exchange rate changes and other factors related to the uncertainties of the industry and global economies.
+Added: Such matters could draw down our cash reserves, which could adversely affect our financial condition, reduce the value of our common stock and possibly impinge our ability to raise debt and equity funding in the future, at a time when we might need to raise additional cash or elect to raise additional cash.
Accordingly, there can be no assurance that events will not require us to seek additional capital or, if required, that such capital would be available on terms acceptable to us, if at all.
13 unchanged sentences
Any redemptions could have a material adverse effect on our business, financial condition and results of operations.
+Added: The price of shares of our Common Stock has fluctuated substantially.
+Added: The price of shares of our common stock has fluctuated substantially.
+Added: Therefore, some investors who have purchased our common stock at high prices face the risk of losing a significant portion of their original investment if they have to sell at a time when the price of shares of our common stock has declined.
+Added: For example, during the fourth quarter of 2025, and in particular the months of November and December 2025, the price of our common stock and trading volume significantly increased.
+Added: During this period, we did not make any significant announcements other than our financial condition and results of operations for the three and nine months ended September 30, 2025.
+Added: Accordingly, the market price of our common stock may fluctuate dramatically and may decline rapidly, irrespective of any developments in our business.
+Added: In addition, the volatility of our stock price could cause other consequences including causing a short squeeze due to the difference in investment decisions by short sellers of shares of our common stock and buy-and-hold decisions of longer investors.
Unpredictable fluctuations in our operating results could disappoint analysts or our investors, which could cause our stock price to decline.
23 unchanged sentences
If our operating or financial results do not meet our guidance or the expectations of investment analysts, our stock price may decline.
−Removed: We have adopted certain anti-takeover measures that may make it more difficult for a third party to acquire us.
−Removed: Our Board of Directors has the authority to issue up to 1,117,000 shares of preferred stock in addition to the outstanding shares of Series A preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote or action by the stockholders.
−Removed: The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.
−Removed: The issuance of shares of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.
−Removed: We have no present intention to issue additional shares of preferred stock.
+Added: Because we do not intend to pay dividends on our common stock, stockholders will benefit from an investment in our stock only if it appreciates in value.
+Added: We have never declared or paid any cash dividends on our shares of common stock.
+Added: We currently intend to retain all future earnings, if any, for use in the operations and expansion of the business.
+Added: As a result, we do not anticipate paying cash dividends in the foreseeable future.
+Added: Any future determination as to the declaration and payment of cash dividends will be at the discretion of our Board of Directors and will depend on factors the Board of Directors deems relevant, including, among others, our results of operations, financial condition and cash requirements, business prospects, and the terms of our financing arrangements, if any.
+Added: Accordingly, realization of a gain on stockholders’ investments will depend on the appreciation of the price of our common stock.
+Added: There is no guarantee that our common stock will appreciate in value.
+Added: We have adopted certain anti-takeover measures that may make it more difficult for a third party to acquire us and the rights of the holders of common stock may be impaired by the potential issuance of preferred stock .
+Added: Our Board of Directors has the authority, without stockholder approval, to issue preferred stock with voting, dividend, conversion, liquidation or other rights and this could adversely affect the voting power and equity interest of the holders of common stock.
+Added: Preferred shares could be issued with the right to more than one vote per common share and could be utilized as a method of discouraging, delaying or preventing a change of control.
+Added: These steps could be taken without any further vote or action by the common stockholders.
+Added: The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued.
+Added: The possible negative impact on takeover attempts could adversely affect the price of our common stock.
+Added: Although we have no present intention to issue any shares of preferred stock or to create any new series of preferred stock, we may issue such shares in the future.
Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition or change of control, or changes in our management, which could adversely affect the market price of our common stock.
12 unchanged sentences
If the bid price of our common stock remains below $1.00 per share for thirty consecutive business days, we could be subject to delisting from the Nasdaq Global Select Market.
+Added: In addition, the continued listing of our common stock is contingent upon our compliance with The Nasdaq Global Select Market’s conditions for continued listing.
+Added: If we fail to meet any Nasdaq listing requirements, including the minimum bid price, satisfaction of minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity and certain corporate governance requirements, and do not regain compliance, we may be subject to delisting by Nasdaq.
Any delisting from The Nasdaq Global Select Market could have an adverse effect on our business and on the trading of our common stock.
5 unchanged sentences
federal net operating loss carryforwards of approximately $50.5 million.
−Removed: We have net operating loss carryforwards of approximately $108,000, primarily in the state of California, as of December 31, 2024.
+Added: We have state net operating loss carryforwards of approximately $138,000, primarily in the state of California, as of December 31, 2025.
We do not expect to utilize the loss carryforwards in the next several years unless Tongmei pays a dividend.
32 unchanged sentences
These laws and regulations govern the use, storage, discharge and disposal of hazardous materials during manufacturing, research and development, and sales demonstrations.
−Removed: If we, or any of our partially owned supply chain companies, fail to comply with applicable regulations, we could be subject to substantial liability for clean-up efforts, personal injury, fines or suspension or be forced to close or temporarily cease our operations, and/or suspend or terminate the development,
−Removed: manufacture or use of certain of our products, the use of our facilities, or the use of our real property, each of which could have a material adverse effect on our business, financial condition and results of operations.
+Added: If we, or any of our partially owned supply chain companies, fail to comply with applicable regulations, we could be subject to substantial liability for clean-up efforts, personal injury, fines or suspension or be forced to close or temporarily cease our operations, and/or suspend or terminate the development, manufacture or use of certain of our products, the use of our facilities, or the use of our real property, each of which could have a material adverse effect on our business, financial condition and results of operations.
The Chinese central government is demonstrating strong leadership to improve air quality and reduce environmental pollution.
25 unchanged sentences
Although we have in place engineering, administrative and personnel protective equipment programs to address these issues, our ability to expand or continue to operate our present locations could be restricted or we could be required to acquire costly remediation equipment or incur other significant expenses if we were found liable for failure to comply with environmental and safety regulations.
−Removed: Existing or future changes in laws or regulations in the United States and China may require us to incur significant expenditures or liabilities, or may restrict our operations.
+Added: Existing or future changes in laws or regulations in the United States or China may require us to incur significant expenditures or liabilities, or may restrict our operations.
In addition, our employees could be exposed to chemicals or other hazardous materials at our facilities and we may be subject to lawsuits seeking damages for wrongful death or personal injuries allegedly caused by exposure to chemicals or hazardous materials at our facilities.
12 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.